Correlation Between PRECISION DRILLING and Volkswagen

Can any of the company-specific risk be diversified away by investing in both PRECISION DRILLING and Volkswagen at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining PRECISION DRILLING and Volkswagen into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PRECISION DRILLING P and Volkswagen AG, you can compare the effects of market volatilities on PRECISION DRILLING and Volkswagen and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in PRECISION DRILLING with a short position of Volkswagen. Check out your portfolio center. Please also check ongoing floating volatility patterns of PRECISION DRILLING and Volkswagen.

Diversification Opportunities for PRECISION DRILLING and Volkswagen

-0.81

Correlation Coefficient

PRECISION DRILLING  Volkswagen

Pay attention - limited upside

The 3 months correlation between PRECISION and Volkswagen is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding PRECISION DRILLING P and Volkswagen AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volkswagen AG and PRECISION DRILLING is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on PRECISION DRILLING P are associated (or correlated) with Volkswagen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Volkswagen AG has no effect on the direction of PRECISION DRILLING i.e., PRECISION DRILLING and Volkswagen go up and down completely randomly.

Pair Corralation between PRECISION DRILLING and Volkswagen

Assuming the 90 days trading horizon PRECISION DRILLING P is expected to under-perform the Volkswagen. In addition to that, PRECISION DRILLING is 1.25 times more volatile than Volkswagen AG. It trades about -0.19 of its total potential returns per unit of risk. Volkswagen AG is currently generating about 0.13 per unit of volatility. If you would invest  9,150  in Volkswagen AG on December 24, 2024 and sell it today you would earn a total of  1,320  from holding Volkswagen AG or generate 14.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

PRECISION DRILLING P  vs.  Volkswagen AG

PRECISION DRILLING

Risk-Adjusted Performance

Very Weak

Over the last 90 days PRECISION DRILLING P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Volkswagen AG

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Volkswagen AG are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Volkswagen exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PRECISION DRILLING and Volkswagen

The main advantage of trading using opposite PRECISION DRILLING and Volkswagen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PRECISION DRILLING position performs unexpectedly, Volkswagen can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Volkswagen will offset losses from the drop in Volkswagen's long position.

The idea behind PRECISION DRILLING P and Volkswagen AG pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.